UK: Mining, oil and gas companies traded on AIM - new requirements

Last Updated: 21 March 2006
Article by Peter Smith and Peter Bateman

On 16 March the London Stock Exchange (LSE) published guidance for companies involved in exploration, development or production of mining, oil and gas resources. The guidance imposes additional requirements in terms of the due diligence required of such companies and their advisers, the information that must be publicly disclosed when seeking admission to AIM, and their continuing obligations to announce price-sensitive developments. The guidance took effect immediately and effectively supplements the AIM Rules.

The guidance has been drafted after consultation with industry experts and members of the AIM community and is intended to codify existing best practice.

To view the article in full, please see below:


Full Article

On 16 March the London Stock Exchange (LSE) published guidance for companies involved in exploration, development or production of mining, oil and gas resources. The guidance imposes additional requirements in terms of the due diligence required of such companies and their advisers, the information that must be publicly disclosed when seeking admission to AIM, and their continuing obligations to announce price-sensitive developments. The guidance took effect immediately and effectively supplements the AIM Rules.

The guidance has been drafted after consultation with industry experts and members of the AIM community and is intended to codify existing best practice.

Background

A significant proportion of the companies on AIM are natural resource companies - companies involved in exploration, development or production of mining, oil and gas resources. The large numbers of resource companies that have joined AIM reflect the prolonged upturn in the commodity sector driven, perhaps, by the emergence of China and India as economic powers.

Typically such companies, particularly exploration and developments ones, involve a much higher degree of risk than companies in most other sectors of the economy. A number of companies, such as Regal Petroleum, have run into difficulties and the LSE is concerned to protect investors and the reputation of AIM.

Despite the increased risks associated with resource companies, the AIM Rules have not to date imposed any special requirements on such companies. By contrast, for many years the UKLA’s Listing Rules (and now the Prospectus Rules as expanded by the Recommendations of the Committee of European Securities Regulators (CESR)) have imposed additional requirements on ‘mineral’ companies. Best practice, however, has always been for AIM companies to include in their admission documents substantially all the information that would be required for a prospectus of a company joining the Official List.

The Guidance

Following consultation, the LSE has published the new 16-page guidance which, although not formally part of the AIM Rules, effectively supplements the Rules and will need to be followed by resource companies themselves, their advisers and nominated advisers (Nomads).

The guidance deals principally with the specific requirements that will apply to a resource company that is seeking admission to AIM, and with its continuing obligations to announce price-sensitive developments. In particular:

Admission requirements

  • The admission document must contain a report by a Competent Person on the company’s material assets and liabilities. This reflects current market practice and is similar to the requirements applicable to ‘mineral companies’ seeking admission to the Official List. Assets include all plant and equipment, licences, joint ventures and other arrangements to exploit resources, and liabilities include all royalty payments, contractual agreements and minimum funding requirements relating to the company’s assets or work programme.
  • The Competent Person (CP) must be independent of the company, and must not receive fees that are linked to the admission or value of the company. This would appear to prohibit the company granting the CP options or shares, or paying the CP an ‘IPO success fee’ or admission bonus.
  • The report must be addressed to both the company and its Nomad and contain certain information specified in the Appendices to the guidance.
  • The CP must review the rest of the admission document and confirm in writing that nothing in it is inconsistent with the CP’s report.
  • The admission document must include summaries of all material subsisting contracts which relate to the company’s assets or liabilities, even if the contract was entered into in the ordinary course of business or more than two years before admission. This requirement modifies for resource companies paragraph 22 in Annex I of Appendix 3 to the Prospectus Rules.
  • The Nomad is expected to conduct "full due diligence" on the company and its assets prior to admission, including where practical a site visit and physical inspection of the company’s physical assets. Where assets are located outside the UK, a formal opinion should be obtained from local lawyers on matters such as (i) the proper incorporation and good standing of any incorporated subsidiary or interest and (ii) the title to or validity and enforceability of any assets (including licences and agreements).
  • The admission document should disclose any payments of more than £10,000 in aggregate made by or on behalf of the company to any government or regulatory authority or similar body in relation to the acquisition of, or maintenance of, its assets - e.g. fees paid to a government for a concession or licence, or money payable under royalty or tax agreements.

Continuing obligations

  • All announcements by a resources company must be vetted by an appropriate person from the company’s Nomad before release.
  • Where an announcement contains a statement about the company’s resources or reserves, details should be given of the internationally recognised standard ("Standard") that has been used (such as a standard published by the Institute of Materials, Minerals and Mining, or the Society of Petroleum Engineers). If a change occurs in relation to the company’s resources or reserves that is likely to be price-sensitive, so that under Rule 11 an announcement must be made without delay, the company may not be able to verify all the information in the announcement in accordance with the appropriate Standard. In such a case, an estimate may be included, but it must be "accurate and not false or misleading", and as soon as possible thereafter duly verified information must be announced.
  • Exploration drilling updates must be announced under Rule 11.
  • A qualified professional from the company or an appointed adviser (who may be the CP), must sign off on every announcement containing a drilling update or a statement about the company’s resources or reserves.
  • Every Nomad acting for a resource company must ensure that it has appropriate access to suitably experienced and qualified individuals in the sectors in which its AIM clients operate. These individuals need not necessarily be full-time employees of the Nomad: they can be engaged on a consultancy basis.

The guidance does not apply to companies which purely invest in or provide consultancy, advice or other such services to resource companies.

Click here to access the guidance in a new window.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 20/03/2006.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.